"If not redeemed, then only reason I can think they would have,...

"If not redeemed, then only reason I can think they would have, would be a large aquisition."

I think there would certainly be a lot of speculation in the press regarding SEV's next target, should they choose not to redeem the TELYS3, thereby keeping $500m of their cash war chest. However, even if they were to use up all of this (and the rest) of their cash on a major acquisition, the risk of insolvency would remain small given the amount of cash that this acquisition would be likely to generate (along with the rest of SEV's many assets, especially its extensive listed share portfolio).

"If that were the case, then would stepup imply a greater risk of insolvency?"

Therefore I can't see step-up directly being seen as implying a higher risk of insolvency.

"My feeling is that stepup would lower price.
Time will tell, but an example to look at is the Santos securities, they went up when redemption was confirmed."

I think if redemption is confirmed, the share price will immediately approach $100, should they be given the chance to trade following the announcement. If step-up is announced, then the direction of the share price is anyone's guess: ultimately it will depend on what the share price is at before the announcement is made, but I really cannot see it falling below $90 if step-up is confirmed. A share price this low would mean an enormous yield and I can't see the market letting the yield get too high.

The first five months of 2010 will be a very interesting time for holders of SEVPC, to see if SEV makes any further acquisitions, to see what happens to interest rates, and ultimately to see how the TELYS3 end up.